Hi
The same issue was discussed in another forum on 7th March so, to investigate, I tried installing it myself in my dev environment which doesn't have any Dynamics modules installed, I also encountered the same error. As I was keeping an eye on the issue, I noticed the next day on 8th March that an update (version 1.2.402) was available so I tried again. Here's what I found:
When an installation was in progress, it showed that it was trying to install two versions (1.2.28.0 and 1.2.402). The first one failed but the 1.2.402 one succeeded. However, overall it still showed as installation failed. (Just as shown in the screenshot in the original post).
Please ignore that error message if the latest version installation succeeds and proceed with the next steps. Go to advance settings of that environment and you'd notice that you're now able to see D365 App for Outlook and you'd be able to continue with the rest of the steps to enable it for your users.
I hope this information helps. Please give it a thumbs up 👍🏻 if you appreciate my efforts.
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Kind regards
Gulshan